Jump to content
Sign in to follow this  

Question about the Keysnian model AS curve

Recommended Posts

About the Keynesian curve, is it an AS curve or a LRAS curve. In the oxford book they use both AS and LRAS whereas in the cambridge textbook it says the keynesian curve is a short run curve.

 

Additionally, the vertical line in the Keynesian curve  is not the same as the potential output right? It should be the maximum output of the country  when it employs all the resources in the economy, no natural unemployment.but potential output is with natural unemployment.

In the oxford book, they say the vertical line is just the full potential, but in other textbooks, pearson and cambridge, they say it is not the full potential and it exceeds the full potential.

 

I am confused.

Share this post


Link to post
Share on other sites

About the Keynesian curve, is it an AS curve or a LRAS curve. In the oxford book they use both AS and LRAS whereas in the cambridge textbook it says the keynesian curve is a short run curve.

 

Additionally, the vertical line in the Keynesian curve  is not the same as the potential output right? It should be the maximum output of the country  when it employs all the resources in the economy, no natural unemployment.but potential output is with natural unemployment.

In the oxford book, they say the vertical line is just the full potential, but in other textbooks, pearson and cambridge, they say it is not the full potential and it exceeds the full potential.

 

I am confused.

Keynesian curve is the same curve in both SRAS and LRAS. 

The vertical curve should be the potential maximum output in a country keeping natural unemployment in mind. It does employ all resources at the vertical line yes, but there is still natural unemployment because there will always be natural unemployment present, it is not possible to get rid of it, decreasing is to some extent possible though. 

 

Hope this helped :)

  • Like 1

Share this post


Link to post
Share on other sites

 

About the Keynesian curve, is it an AS curve or a LRAS curve. In the oxford book they use both AS and LRAS whereas in the cambridge textbook it says the keynesian curve is a short run curve.

 

Additionally, the vertical line in the Keynesian curve  is not the same as the potential output right? It should be the maximum output of the country  when it employs all the resources in the economy, no natural unemployment.but potential output is with natural unemployment.

In the oxford book, they say the vertical line is just the full potential, but in other textbooks, pearson and cambridge, they say it is not the full potential and it exceeds the full potential.

 

I am confused.

Keynesian curve is the same curve in both SRAS and LRAS. 

The vertical curve should be the potential maximum output in a country keeping natural unemployment in mind. It does employ all resources at the vertical line yes, but there is still natural unemployment because there will always be natural unemployment present, it is not possible to get rid of it, decreasing is to some extent possible though. 

 

Hope this helped :)

 

 

But in the some textbooks, they say the vertical line involves no natural unemployment and is not the same as the potential output. so I dont know what to trust. And what should I label the curve? I mean should I label LRAS or SRAS or keynsian AS?

Share this post


Link to post
Share on other sites

 

 

About the Keynesian curve, is it an AS curve or a LRAS curve. In the oxford book they use both AS and LRAS whereas in the cambridge textbook it says the keynesian curve is a short run curve.

 

Additionally, the vertical line in the Keynesian curve  is not the same as the potential output right? It should be the maximum output of the country  when it employs all the resources in the economy, no natural unemployment.but potential output is with natural unemployment.

In the oxford book, they say the vertical line is just the full potential, but in other textbooks, pearson and cambridge, they say it is not the full potential and it exceeds the full potential.

 

I am confused.

Keynesian curve is the same curve in both SRAS and LRAS. 

The vertical curve should be the potential maximum output in a country keeping natural unemployment in mind. It does employ all resources at the vertical line yes, but there is still natural unemployment because there will always be natural unemployment present, it is not possible to get rid of it, decreasing is to some extent possible though. 

 

Hope this helped :)

 

 

But in the some textbooks, they say the vertical line involves no natural unemployment and is not the same as the potential output. so I dont know what to trust. And what should I label the curve? I mean should I label LRAS or SRAS or keynsian AS?

 

Can't tell you what to trust, but I have learned it that way at least. If you have a new-classical LRAS curve and a Keynesian AS curve in the same test paper I would label them differently to indicate that one is the new-classical LRAS curve and the other the Keynesian AS curve 

  • Like 1

Share this post


Link to post
Share on other sites

Hi,

 

I'm glad that you have the pearson book, Lovelife.

 

Let's make things clear. The Keynesian AS curve is what we call the SRAS curve, as it usually works in the short-run. It is not the same as LRAS. The monetarist AS curve is the (vertical) LRAS and this shows the potential output at the full employment level. The reason why we use two AS curves is to show that changes in AD will most usually have effects on real GDP only in the short-run, whereas in the long-run it will mostly influence the average price levels, but not the output. This is mainly due to the sticky wages.

 

While operating at the full employment level of output, the economy still experiences frictional, seasonal and structural unemployment, all of which are part of the natural rate of unemployment. So Lynxsarin was right here. Have a look at p.296 for the natural rate of U in the pearson book.

 

Hope this helped clear any doubts.

 

EconDaddy

IB Economics tutor and examiner

www.econdaddy.com

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.